Tariff war cost Canadian Pacific $200M over past year, CEO says

Canadian Pacific Kansas City Ltd. has suffered a $200-million blow from the ongoing tariff war set off by the United States, said CEO Keith Creel, who nonetheless remained upbeat amid ongoing doubts about the North American free trade pact.

“We’ve already absorbed a pretty significant hit from all the uncertainty — I think about $200 million of revenue impact, maybe higher,” Creel told analysts on a conference call Wednesday.

The chief executive, who helms the only railroad to span all three countries on the continent, said the upcoming renegotiation of the United States-Mexico-Canada Agreement can be mutually beneficial while also rejigging cargo flows to reduce the trade deficit that U.S. President Donald Trump has repeatedly cited as a source of aggravation.

“Positive renewal of the USMCA can be true at the same time, because trade between these three nations, even if it gets rebalanced a bit, is critically important to all three nations’ success. We depend upon each other,” he said.

The chief executive expressed hope that the deal, which has seen trilateral trade more than quadruple to over US$1.6 trillion since the North American Free Trade Agreement came into effect in 1994, would be renewed this summer.

“I would think before the midterms. That’s just me speculating based on the way I’m reading the tea leaves,” he said.

Creel then qualified: “We’ve gone through some choppy waters. They may get choppier. But at the end of the day, we’ll get through the storm.”

Profit down 10%

In its latest quarter, CPKC managed to nudge up revenue by one per cent to $3.92 billion, partly on the back of improved operating efficiency and in line with a slight boost in freight volumes. A bumper crop helped drive grain revenues to record highs, though rain at the Port of Vancouver curtailed that increase.

“We continue to like CPKC’s growth outlook driven largely by new business wins and merger-related synergies that are independent of the macro,” said National Bank analyst Cameron Doerksen in a note to investors.

Despite a revenue uptick that capped off a year of solid earnings increases, CPKC said profits fell 10 per cent in its latest quarter. Net income declined to $1.08 billion in the quarter ended Dec. 31 from $1.20 billion in the same period a year earlier.

On top of trade angst, a less publicized source of anxiety has rippled through the rail industry since last summer.

Union Pacific Corp., the second-largest railroad operator in the United States, announced in July it wants to buy Norfolk Southern Corp. in a US$85-billion deal that would create that country’s first transcontinental railway, and potentially trigger a final wave of rail mergers across North America.

The proposed merger would marry Union Pacific’s vast rail network in the Western…